Saudi Arabia Forges Economic Alliances with Global Powers

Since the beginning of 2023, Saudi Arabia has achieved significant economic milestones and successfully hosted several international conferences and events.

These endeavors have resulted in the establishment of economic alliances and blocs with major countries around the world.

Saudi Crown Prince Mohammed bin Salman launched giant projects throughout the year, contributing to the support of the economic diversification policy and aligning with the Kingdom’s vision for the next phase.

Saudi Arabia also achieved a historic milestone by winning the bid to host “Expo 2030,” the largest world fair.

After competing with South Korea and Italy, Saudi Arabia secured 119 votes from member countries, thus selecting Riyadh as the venue for the international expo in 2030.

Moreover, the Kingdom played host to numerous international economic conferences, forums, and events, including the 10th edition of the Arab-Chinese Businessmen Conference, the Saudi-Arab-African Economic Conference, the Saudi-Turkish Investment Forum, and the Saudi-Korean Investment Forum.

Saudi Arabia also hosted the Saudi-European Investment Forum, Climate Week, World Tourism Day events, and the seventh edition of the Future Investment Initiative, which witnessed significant attendance from leaders, officials, and CEOs of major companies worldwide.

Non-oil Activities

The Saudi government’s commitment to structural reforms in both the financial and economic spheres has contributed to the continuous growth of the non-oil gross domestic product (GDP) throughout 2023.

The government anticipated a non-oil GDP growth of 5.9% for the year.

As a result of these achievements, several credit rating agencies, the International Monetary Fund (IMF), and the World Bank have revised their expectations for Saudi Arabia’s economic growth.

The IMF noted that the Saudi economy is undergoing a transformation due to ongoing reforms aimed at reducing reliance on oil, diversifying income sources, and enhancing competitiveness.

Concurrently, credit rating agency Fitch upgraded its credit rating for Saudi Arabia to “A” with a stable outlook, reflecting its financial strength and substantial sovereign assets.

The recently approved state budget for the fiscal year 2024, led by King Salman bin Abdulaziz, focuses on enhancing non-oil sectors expected to contribute to a 4.4% growth in the kingdom’s overall GDP next year.

The budget estimates revenues at SAR 1.172 trillion ($312.5 billion) and expenditures at SAR 1.251 trillion ($333.6 billion), with a limited deficit of SAR 79 billion ($21 billion).

Labor Market

The Saudi Arabian labor market witnessed the highest citizen participation during Q2 of 2023 compared to previous quarterly periods.

The number of employees in the private sector increased to 2.2 million, and the unemployment rate among Saudis decreased to 8.3% from 9.7% in the same period in 2022.

This approaches the government target of 7% outlined in the Kingdom’s national transformation plan, “Vision 2030.”

Thanks to governmental measures and initiatives, the Kingdom successfully managed to control the inflation rate, which continued to gradually decrease from the beginning of the year until October.

It reached the lowest level in almost two years at 1.6% on an annual basis.

Energy Markets

In a significant economic development, Saudi Arabia’s Minister of Energy, Prince Abdulaziz bin Salman, announced new discoveries of natural gas in the Eastern Province and the Empty Quarter of the Kingdom.

He also revealed Saudi Arabia’s intention to operate the Middle East's first hydrogen-powered train in the coming months.

Regarding global energy markets, the Saudi government decided to voluntarily reduce its production by 1.5 million barrels per day to a level of 9 million barrels per day after the OPEC+ meeting in Vienna, Switzerland.

This move aims to support global oil markets and protect both producers and consumers from potential harm.

Türkiye's central bank cut its key interest rate by 250 basis points to 45% as expected on Thursday, carrying on an easing cycle it launched last month alongside a decline in annual inflation that is expected to continue.

The central bank indicated it would continue to ease policy in the months ahead, noting that it anticipated a rise in trend inflation in January, when economists expect a higher minimum wage to lift the monthly price readings, Reuters reported.
In a slight change to its guidance, the bank said it will maintain a tight stance "until price stability is achieved via a sustained decline in inflation."
Last month, it said it would be maintained until "a significant and sustained decline in the underlying trend of monthly inflation is observed and inflation expectations converge to the projected forecast range."
In a Reuters poll, all 13 respondents forecast a cut to 45% from 47.5% in the one-week repo rate. They expect it to hit 30% by year end, according to the poll median.
In December, the central bank cut rates for the first time after 18-month tightening effort that reversed years of unorthodox economic policies and easy money championed by President Recep Tayyip Erdogan, who has since supported the steps.
To tackle inflation that has soared for years, the bank had raised its policy rate by 4,150 basis points in total since mid-2023 and kept it at 50% for eight months before beginning easing.
Annual inflation dipped to 44.38% last month in what the central bank believes is a sustained fall toward a 5% target over a few more years. It topped 75% in May last year.
"While inflation expectations and pricing behavior tend to improve, they continue to pose risks to the disinflation process," the bank's policy committee said after its rate decision.
A 30% administered rise in the minimum wage for 2025 was lower than workers had requested, though it is expected to boost monthly inflation readings this month and next, economists say.
The expected January inflation rise "is mainly driven by services items with time-dependent pricing and backward indexation," the bank said.
The central bank has eight monetary policy meetings set for this year, down from 12 last year.

Saudi Arabia Forges Economic Alliances with Global Powers